Reserve Bank of Australia widely tipped to deliver third interest rate cut of 2025 on Tuesday after shock hold in July

Sky News AU

5 days ago

The Reserve Bank of Australia is tipped to deliver the third rate cut of the year on Tuesday after it shocked mortgage holders and economists across the nation by holding rates last month.
The RBA was predicted to lower the cash rate from 3.85 per cent to 3.6 per cent in July but the central bank said it was waiting for more data to show inflation was continuing to decline.
'The Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis,' the central bank said.
Aussies were delivered this crucial information late last month via fresh data from the Australian Bureau of Statistics.
It revealed trimmed mean inflation - the RBA's preferred measure which analyses the middle 70 per cent of price changes - was 2.7 per cent as it continues to fall within the central bank's 2-3 per cent target band.
A higher-than-expected unemployment rate for June has also boosted hopes for a cut on Tuesday and even sparked backlash against the RBA's July call.
Independent economist Warren Hogan on Monday said the RBA was going to be factoring in several more rate cuts down the track after a likely cut on Tuesday.
'They'll cut tomorrow. They'll have the cash rate at 3.6 (per cent). They'll be factoring in another two rate cuts after that to their forecasts,' Mr Hogan said on Business Now.
He also predicted the central bank will hold in September before again cutting rates in November.
Economists were shocked by the July rate hold after monthly inflation data for May showed trimmed mean inflation fall from 2.8 per cent to 2.4 per cent.
However, the ABS only publishes a monthly consumer price index indicator which examines about two thirds of the goods and services in the quarterly inflation figures.
The RBA gives little weight to the monthly figure, though this will soon change as the ABS will begin publishing a full monthly consumer price index from November.
Mr Hogan said Australians could be delivered rate cuts at a quicker pace after the ABS' change.
'Every month it will be a full CPI. That means every six weeks when they (the RBA) meet, they will have all the information - up to date - on inflation. There will be no reason to wait,' Mr Hogan said.
'That's exactly what the (RBA) governor said and the minutes said after the last meeting. That 'we considered a rate cut, but we thought we should wait for more information i.e quarterly CPI'.'
Motley Fool chief economist Scott Phillips said there were good reasons for the central bank to cut rates on Tuesday.
'They can afford to be less restrictive without GDP running too hot,' Mr Phillips said on Sky News.
'They can afford to be less restrictive without inflation all of a sudden picking up."
Money markets say there is a 99.6 per cent chance of the central bank cutting rates on Tuesday.
However, a similar prediction was made in the lead up to the July call.
The RBA delivered 0.25 per cent rate cuts in February and May after holding rates at 4.35 per cent for almost a year and a half.
It follows the central bank hiking rates 13 times between April 2022 and November 2023 to stamp out soaring post pandemic inflation.